Earlier this week, Visa Inc. announced a 50% hike in its quarterly dividend to the holders of its class A, B and C equity shares. Consequently, the company will pay a quarterly dividend of 33 cents per share, up from 22 cents paid in the prior quarter.
This takes the annual cash dividend of Visa to $1.32 per share, compared with 88 cents paid earlier. Considering the closing share price of $136.49 on October 24, 2012, the increased dividend translates into a dividend yield of 97%, substantially higher than 64% paid earlier.
The increased dividend will be paid on December 4, 2012 to shareholders of record as of November 16, 2012. Visa’s strong balance sheet and ample free cash balance allowed it to increase the quarterly dividend amount. The company believes in sharing its returns with shareholders to enhance shareholder value. Consequently, it has been increasing its dividend annually over the past four years.
In October 2011, Visa hiked its annual dividend by 47% to 88 cents per share from the prior dividend payout of 60 cents per share. Before that, in October 2010, the company increased its annual dividend by about 20% from the 2009 level, when it had raised the dividend by 19% over 2008.
Visa is scheduled to release its fourth quarter and fiscal 2012 on October 31 after the closing bell.
The Zacks Consensus Estimate for Visa’s fiscal fourth-quarter 2012 (ended September 30, 2012) earnings is currently pegged at $1.50 per share, up about 18% year over year. Of the 26 firms covering the stock, one revised the estimate upward while no downward revisions were witnessed in the past 30 days.
For fiscal 2012 (ended September 30, 2012), Visa’s earnings are expected to be $6.16 per share, which surged about 23% over 2011 level.
Visa’s fiscal third-quarter 2012 (ended June 30, 2012) operating earnings of $1.56 per Class A common share outpaced the Zacks Consensus Estimate of $1.45. Additionally, the earnings substantially exceeded prior-year quarter’s earnings of $1.26 per share, primarily based on lower share count.
Visa, which competes with MasterCard Incorporated , currently carries a Zacks #2 Rank, implying a Buy rating for the short term. We maintain a long-term Neutral recommendation on the stock.